After two years of economic instability, fuelled in large part by the climbing price of consumer energy bills, energy prices are set to plateau. The cost-of-living crisis formally began with the marked increase in energy costs at the end of 2021, which heavily impacted both businesses and households.
The Ofgem energy price cap, previously designed as a failsafe for predatory business practice, had become an emergency ceiling for skyrocketing bills. But today, as government intervention is set to end, there is positive news that prices are plateauing – and that some companies are set to sell tariffs below the price cap.
The Energy Crisis
The energy crisis began in the UK in the winter of 2021, when a sudden climb in the cost of natural gas led to reactionary measures from energy suppliers. The UK’s recently-imposed barriers to trade, brought on by Brexit, had some part in the rising cost.
However, the energy crisis is not a purely national one. There are global precedents behind the energy crisis as well as local ones, which have had their own measurable impacts on availability and price of energy in other countries. Russia’s invasion of Ukraine is one of the main global factors, given the shaky accord by which nations previously invested in Russian oil and gas; today, Russian energy is rightfully a taboo purchase, and Russia’s efforts to force the UN’s hand have made it harder to procure regardless.
Government Assistance
The UK government was initially slow to react when energy prices began to rise in late 2021, but was swiftly pressured into offering assistance as Ofgem’s price cap failed to keep prices at a comfortable level. This assistance came in two distinct forms: the Energy Bills Support Scheme, which was a £400 rebate on energy bills over the winter of 2022-23; and the Energy Price Guarantee, which capped the default tariff rate at which suppliers could charge consumers.
Energy Prices Cooling Down
Recent analysis has suggested that the energy crisis might be nearing its end, and that energy bills are likely to decrease significantly by Q3 2023. They are expected to drop 19% below the government’s Energy Price Guarantee, and remain 17% below during the winter months of Q4.
Despite this sink in energy prices, energy bills remain far higher than their pre-pandemic average, and show no signs of returning to a pre-inflation-crisis norm. As such, households are still looking for alternative means of improving affordability, be it downsizing property for a smaller and better-insulated home or considering energy-efficient upgrades.
In the long term, though, the conventional models for energy delivery are expected to become obsolete. Public pressure is piling on for state-supported transition to cleaner energy sources, which would reduce reliance on natural gases and their volatile prices. Even with high energy prices for the foreseeable future, the horizon promises a much cheaper framework for a greener future.
